What is MOU: Definition, Characteristics, Types, and Purpose of Making it

What is MOU – Memorandum of Understanding, this phrase which is often abbreviated as MOU is one of the important components in making an agreement between two parties, usually used in business.

Through this letter, the parties involved in the agreement can express key points that are important in order to make the negotiation process run smoother. Because of that MOU cannot be made just like that.

Before making it, Sinaumed’s must understand the position of this letter in the law and what must be in it. Therefore, in this article we will discuss what an MOU is, starting from its definition, characteristics, how to make it, to examples.

What is an MoU?

According to Munir Fuady (1997), a Memorandum of Understanding is a preliminary agreement which will be followed up and explained in more detail in another agreement. Therefore, the MOU only contains the essentials.

Equivalent to three money, I Nyoman Sudana, et al (1998) view the MOU as a preliminary agreement that will be followed by other agreements. In other words, a Memorandum of Understanding is an initial agreement in the form of a formal document in making an agreement between two or more parties.

In practice, there are two views regarding the binding strength of MOUs. The first view considers the MOU as a mere procedural document that has no legal force at all. Meanwhile, the second view considers the MOU as a legal document that has binding legal force and can be used as a basis for claiming or defending rights.

In short, the first side views the MOU as part of the contract formation process while the second side sees the MOU as a form of basic agreement. According to the regulations, there really is no law that specifically regulates this MOU. As a result, the binding is only based on the commitment and moral responsibility of the parties involved.

Thus, if the MOU that is made fulfills the legal requirements of the agreement set out in the Civil Code, then the MOU is considered valid in the eyes of the law.

By the way, a Memorandum of Understanding in Indonesia is also known as a memorandum of understanding, memorandum of understanding, cooperation agreement, or preliminary agreement. So don’t be confused if you find these names, OK?

The difference between an MOU and a Letter of Agreement

After reading the meaning of the MOU above, maybe you are a little confused because it turns out that an MOU is quite similar to an agreement. In fact, both are different letters. Here’s the difference:

Difference	MOUs	Agreement letter
Legal force	There is no legislation that regulates specifically so that the binder is only the responsibility and commitment of the parties involved.	It is regulated specifically in the Criminal Code and has a clear legal binding
Document content	It only contains matters that are essential and must be known by the parties involved.	Load detailed information. Such as obligations, rights, consequences, responsibilities, and others.

MOU features

A Memorandum of Understanding  or MOU has different characteristics from a letter of agreement in general. This difference then makes the MOU an alternative to create a collaboration. The characteristics of the MOU are as follows:

1. Contains a statement of willingness to cooperate with each other
2. It is a preliminary which will be followed by other, more detailed agreements
3. Generally made concise, even just one page
4. It only contains the main things that are general in nature as an expression of willingness to cooperate with each other
5. Usually there is no coercive obligation on the parties involved
6. It is temporary, meaning that if there is no follow-up in the form of an agreement, the MOU will be canceled by itself. However, if all parties agree, the validity period of this MOU can be extended.
7. Not emphasizing the application of legal sanctions to each party involved
8. Usually made in the form of an underhand agreement.

Types of MOUs

Based on the residence of the parties making the collaboration, MOU can be divided into two types, namely:

National MOUs

This is a type of MOU where all parties live in Indonesia, are Indonesian Citizens and Indonesian Legal Entities. For example, an MOU made by the local government with a company or an MOU between a native of Bandung and a resident of Surabaya.

International MOUs

The second type is an MOU made by parties living in different countries. That is, one party lives in Indonesia and is an Indonesian citizen while the other party comes from another country.

Generally, this MOU is made when the Indonesian government wants to cooperate with foreign governments, legal entities, or companies.

Purpose of Making MOU

1. Avoid cancellation difficulties

The MOU can be used to avoid the difficulty of canceling an agreement in the future. For example, if the business prospects are unclear or it is not certain whether the cooperation will be followed up.

2. Temporary binder

Sometimes signing a contract can take a long time because the negotiations are quite tough. Therefore, instead of having no ties before the contract was signed, an MOU was made that was valid for a certain time.

3. Give time to make a decision to the parties involved

When the parties involved feel that they still need time to think before signing a contract, the MOU will be made as a temporary agreement.

4. To be followed up by more skilled staff

Usually MOUs are made and signed by executives from a company, while for more detailed agreements will be designed and negotiated specifically by staff who are more technically skilled.

Things that Must Be in Mou

Actually, the things that must be in an MOU are a statement of agreement between two or more parties who agree to cooperate in order to achieve a goal.

Even so, there are parts that must be included in the MOU according to the technique for preparing a Memorandum of Understanding that is published on the BPKP’s official website. Here’s the full explanation:

Title

The MOU title must be made precisely so that it is clear who the parties are involved and the nature of the MOU being made. In addition, the title must also be short, concise, and in accordance with the applicable EYD rules.

Finally, the MOU must be agreed upon by all existing parties and if necessary include the logo of the agency involved.

Opening

The preamble is written after the title and forms the first part of the MOU. This section consists of titimangsa (day, date, month, year), place of signing of the MOU, existing positions of the parties, and considerations.

In the position section, the parties are usually referred to as the FIRST PARTY and SECOND PARTY which can be individuals, private legal entities, or public legal entities.

In the consideration section, it must contain a brief description of the main ideas behind the making of the MOU. Usually this section begins with the sentence “By considering the following matters” and then continues with the main ideas that exist.

Each main idea is written in a sentence which is a unified meaning and always begins with a letter of the alphabet, begins with the word “that”, and ends with a semicolon (;).

The substance (contents) of the MOU

Each party that will make the MOU can determine its contents together. Usually the contents represent what they really want and can be written in a short or long way, depending on the agreement. However, often this substance is written briefly and a more detailed formulation will be written in the contents of the contract.

What must be included in the substance of the MOU are:

• The intent or purpose of the parties in carrying out mutually beneficial activities.
• The scope of activities that contains an overview of the activities to be carried out.
• Realization of activities in the form of implementation and details of activities from the MOU.
• The timeframe indicating the validity period of the MOU.
• The costs of implementing activities incurred to carry out activities. This fee can come from one of the parties or all parties or even other sources that are legitimate and have been mutually agreed upon.
• Transitional rules that contain changes that can occur and can only be made if agreed by all parties.

Closing

Closing sentences should be kept simple and not verbose.

Signature of all parties

The signature is below the closing section and is the place for all parties involved to put signatures and full names.

MOU example

Simple MoU example

MEMORANDUM OF UNDERSTAND (MEMORANDUM OF UNDERSTANDING) On this day …………….. date …………….. month …………….. year …………….., each of the undersigned parties: 1. Name : ……………..……………..……………..……………..…………….. Work : ……………..……………..……………..……………..…………….. Address : ……………..……………..……………..……………..…………….. Number: ……………..in this case acting for and on behalf of himself, hereinafter referred to in this agreement as the FIRST PARTY.  2. Name : ……………..……………..……………..……………..…………….. Work : ……………..……………..……………..……………..…………….. Address : ……………..……………..……………..……………..…………….. Based on Identity Card/KTP: ……………..…………….. Number: …………….. in this case acting for and on behalf of himself, hereinafter referred to as the SECOND PARTY.  Both parties agree to carry out the cooperation as outlined in the text of the cooperation agreement with the following conditions: 1. …………………….. 2. ……………………. 3. …………………….. FIRST PARTY SECOND PARTY (…………………..) (…………………)

Example of MoU between agencies

MEMORANDUM OF UNDERSTANDING ( MEMORANDUM OF UNDERSTANDING ) BETWEEN LEGAL AID WITH INDONESIAN ADVOCATE ASSOCIATION (PERADI) Number: ……………………………. On this day …………date ………… month …… year ……, THE PARTIES who have signed below: 1. Name : ……………..……………..……………..…………….. Position : ……………..……………..……………..…………….. Address : ……………..……………..……………..…………….. In carrying out this position acting for and on behalf of the Legal Aid Institute/LBH…………….. hereinafter referred to as the FIRST PARTY. 2. Name : ……………..……………..……………..…………….. Position : ……………..……………..……………..…………….. Address : ……………..……………..……………..…………….. Carrying out this position and therefore acting for and on behalf of the Indonesian Advocates Association (PERADI), hereinafter referred to as the SECOND PARTY.  THE FIRST PARTY and THE SECOND PARTY , hereinafter referred to as the PARTIES, agree to enter into cooperation based on the principle of partnership and provide mutual benefits with the following conditions: article 1 OBJECTIVE This collaboration aims to develop legal knowledge and provide legal aid services to the public. Section 2 FORM OF COOPERATION THE SECOND PARTY provides professional training in providing legal consulting services and/or legal assistance as long as required by the FIRST PARTY Article 3 SCOPE OF COOPERATION The scope of this cooperation includes: Provision of free training related to legal consulting services. Mutual cooperation in providing legal aid to the community. Other matters deemed necessary and agreed upon by the parties. Article 4 TIME PERIOD This cooperation is valid for 1 (one) year from the date of signing of this Memorandum of Understanding and can be extended in accordance with the agreement of THE PARTIES. The implementation of this cooperation will be evaluated every 3 (three) months. This Memorandum of Understanding on cooperation will be followed up by THE PARTIES by issuing cooperation agreements/contracts to determine the implementation of the program of activities as stipulated in Article 3 above. All differences of opinion and/or disputes arising in the implementation of this cooperation will be resolved by the PARTIES by deliberation. Article 5 CLOSING Any changes and other matters that have not been regulated in this Memorandum of Understanding will be further regulated in writing and carried out by deliberation to reach a consensus by the PARTIES which will become an integral part of this Memorandum of Understanding. This Memorandum of Understanding on cooperation is drawn up in 2 (two) copies on sufficiently stamped paper and has the same legal force, one copy each for the PARTIES. Thus this Memorandum of Understanding on cooperation was drawn up and signed by THE PARTIES in good faith and full of responsibility. …………….., ……………………………. FIRST PARTY SECOND PARTY (…………………) (………………..)

Example of a business cooperation MoU

MEMORANDUM OF UNDERSTANDING ( MEMORANDUM OF UNDERSTANDING ) BETWEEN PT. BANK ……………..…………….. WITH PT. ……………..…………….. Number: ……………..……………..…………….. On this day, …………….. dated …………….., a Memorandum of Understanding was signed, hereinafter referred to as the MoU by and between: Name : ……………..……………..……………..…………….. Position : PRESIDENT DIRECTOR OF PT BANK ……………..…………….. Address : ……………..……………..……………..…………….. In this case acting for and on behalf of PT BANK …………….. domiciled at ……………..…………….. according to Deed No. …………….. date ……………. made by Notary …………….. domiciled at …………….. and hereinafter referred to as the FIRST PARTY.  Name : ……………..……………..……………..…………….. Position : Main Director of PT ……………..…………….. Address : ……………..……………..……………..…………….. In this case acting for and on behalf of PT ASURANSI TAKAFUL …………… domiciled in …………….. and hereinafter referred to as the SECOND PARTY. Furthermore, each party hereby explains in advance the following matters: THE FIRST PARTY is a financial institution in the form of a bank, where the products offered are in the form of raising funds, channeling funds, and other banking services. THE SECOND PARTY is a financial institution that offers insurance business services. In relation to the above, the parties agree to implement the provisions of this MoU as follows: article 1 PURPOSE AND OBJECTIVES Both parties agreed to work together for mutual benefit in order to improve services to the community. Both parties agreed to become a riba-free financial institution. Section 2 TIME PERIOD This cooperation is valid for a period of …………….. years commencing from …………….. to …………….. and can be extended according to the agreement of both parties. Article 3 RIGHTS AND OBLIGATIONS Each party has the following rights and obligations: (1) The FIRST PARTY’s obligations include: Providing investment-based capital in the form of mudharabah financing. Marketing Takaful Insurance products ( Bancassurance ) to every interested customer Issuing a mudharabah deposit account as an investment medium for the SECOND PARTY. Conduct routine training related to socialization of banking products (2) The obligations of the SECOND PARTY include: Providing profit sharing for the FIRST PARTY if the insurance company makes a profit. Providing convenience to customers of PT. BANK …………….. who wants to buy an insurance policy. Conduct training ( training ) on ​​a regular basis related to socialization of insurance products. Article 4 ADDITIONAL PROVISIONS Whereas regarding matters that are not or have not been sufficiently regulated in this MoU, will be provided in the form of an addendum that is an integral part of this MoU. Article 5 CLOSING This agreement is made in 2 (two) copies, each of which is sufficiently stamped as evidence which has the same legal provisions. FIRST PARTY SECOND PARTY (………………….) (…………………)

Thus the discussion of what is an MOU to an example of an MOU. Hopefully all the discussion above is useful for you. If you want to find books on business law, then you can get them at sinaumedia.com .

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